A New Index of Export–Import Proximity: Conceptual Foundations and Global Patterns

This paper develops a new product-space-based measure of export–import similarity, the Trade Proximity index. The index captures the structural alignment between a country's import and export baskets by accounting for inter-product relatedness, rather than relying solely on categorical overlap, which ignores any inter-industry relatedness. We position Trade Proximity relative to the traditional Grubel–Lloyd index of intra-industry trade, clarifying their conceptual differences and showing how the two measures diverge when trade similarity is evaluated through the lens of productive capabilities. Using historical product-level trade data spanning 1962–2023, we document the long-run evolution of Trade Proximity and compare it to conventional intra-industry measures for developed and developing economies. While the two indices are positively correlated, Trade Proximity reveals distinct dynamics, including a stronger convergence of developing countries during the 1990s and a subsequent divergence that is not captured by the Grubel–Lloyd index. We conclude by discussing how the Trade Proximity index can inform future research on global value chains, learning through imports, structural upgrading, and trade policy.